American Tower to Outperform - Analyst Blog

We upgrade our recommendation for American Tower Corp. (AMT) to Outperform based on our assessment that surging demand for wireless data and video in the developed markets couple with diversification into several emerging markets will significantly boost the company's long-term growth.  The company continues to perform strongly driven by substantial demand for tower space to facilitate high-speed wireless data and video services, together with emerging 3G/4G technologies.

American Tower is going through a healthy leasing environment as wireless carriers are gradually upgrading their networks. Rental & Management revenue, adjusted EBITDA, and free cash flow financial metrics remain favorable. Our long-term view regarding the tower industry is positive supported by a spurt of demand for smartphones and other mobile devices throughout the world. Management has also raised its full year 2010 financial outlook.

Mobile subscriber growth has significantly expanded the wireless tower industry. Future financials are likely to be propelled by strong demand for wireless voice, broadband wireless data and video networks, which require more tower space. Deployments of 3G mobile networks promulgate requirements to expand coverage and infrastructure by carriers.

Emerging 4G WiMAX and LTE networks will also create impressive demand for tower leasing. Verizon Wireless (VZ) will start deploying LTE from the end of 2010. AT&T (T) will follow suit from mid-2011. Furthermore, wholesale 4G operators like Clearwire Corp. (CLWR) and LightSquared venture have become major growth area for wireless tower companies.

American Tower is quickly expanding its business operations in various emerging markets. In addition to Brazil and Mexico, American Tower has taken a major initiative to expand its operations in India. This will generate long-run sustainable business for the company.

After China, India is the second largest growth market for wireless services where the expected subscriber base is 737 million by 2012. Furthermore, the company is also expanding the Latin American markets of Chile, Peru, and Colombia. Recently, American Tower has entered into the South African market.

 
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